Change Is Coming: What You Need to Know
The way companies are governed in South Africa is evolving. The Institute of Directors in South Africa (IoDSA) has released the draft King V Governance Code, an updated framework designed to keep corporate governance relevant in a changing world. This article breaks down what King V is, why it’s happening, and how your organisation can prepare.
Why King V?
King V is the latest version of the King Code, a set of principles guiding ethical and effective corporate governance. The update responds to several key shifts in the business environment, including regulatory changes, evolving executive compensation structures, an increasing focus on sustainability, and rapid technological advancements.
One of the major drivers behind this update is the need to align corporate governance with recent amendments to the Companies Act. Additionally, there is a stronger emphasis on responsible remuneration practices and the integration of environmental, social, and governance (ESG) considerations. With digital transformation accelerating, King V also places greater focus on data governance and cybersecurity, ensuring that companies are equipped to manage emerging risks effectively.
The draft is open for public comment until April 4th, 2025, after which the IoDSA will finalise and release the official version.
What’s New: King V vs. King IV
King V introduces several key refinements aimed at making corporate governance more practical, accessible, and relevant to modern challenges.
A major change is the simplification of the code’s structure and language. The number of governance principles have been reduced from 17 to 12, making it easier to navigate and implement. Additionally, King V is now a standalone document, eliminating the need to cross-reference multiple texts.
Another significant update is the introduction of a standardised disclosure template, which is designed to promote consistency in governance reporting. This structured approach will help organisations communicate their governance practices more transparently.
Technology governance is now a more prominent focus, reflecting the increasing reliance on digital systems. King V places greater emphasis on data protection, cybersecurity, and the ethical use of technology in business operations. Organisations will need to evaluate their current digital governance frameworks to align with these expectations.
Integrated thinking remains a cornerstone of King V, reinforcing the idea that businesses should consider the broader economic, social, and environmental impacts of their decisions. This approach encourages organisations to adopt a long-term, sustainable perspective in their governance and strategy.
How to Prepare for King V
Organisations should take proactive steps to align with the new governance code before its final release. The first step is to thoroughly review the draft King V Code and familiarise themselves with its principles and recommendations.
Next, companies should assess their current governance practices against the new framework. Identifying gaps will be crucial in determining what adjustments need to be made. Whether it’s improving board oversight, strengthening technology governance, or refining reporting structures, early preparation will ensure a smoother transition.
Organisations should also start integrating the new disclosure template into their governance reporting. Standardising disclosures early will help ensure compliance and improve transparency.
Finally, stakeholders are encouraged to provide feedback to the IoDSA before the April 4, 2025 deadline in the public comment form. This is an opportunity to contribute insights and ensure that the final version of King V is as effective and practical as possible.
Food for Thought
As King V becomes the new standard, companies should reflect on how these changes will impact their governance structures. Key questions to consider include:
- How will King V influence day-to-day governance processes?
- Are current practices aligned with the increased focus on technology and data governance?
- What steps can be taken to provide constructive feedback that contributes to a more robust final code?
King V represents a significant step forward in South Africa’s corporate governance landscape. By making governance principles more accessible, emphasizing transparency, and addressing modern challenges such as technology governance and sustainability, it aims to strengthen ethical leadership across all organisations.
Companies should take this transition seriously by reviewing the draft, assessing their governance frameworks, and preparing for the upcoming changes. Engaging in the consultation process will not only help shape the final code but also ensure that organisations are ready to implement it effectively.
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